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Comment by PragmaticPulp | Hacker News Reader

Details are sparse in this article. Looks like 7% capital gains tax, first $250K excluded, real estate excluded. Proceeds to primarily fund childhood education (for now).

> For example, stock sales higher than $250,000 would be taxed at 7%. Real estate would not be.

7% (on top of federal cap gains, which are also increasing) is a significant tax rate to start with. If it was 1-2%, I could see people rolling with it. At a whopping 7%, I expect a lot of startup founders and small business owners looking for an exit will be moving across the border to Portland right before they sell their companies.

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The first 250k in profits from capital gains are exempt.

It is estimated that this tax only affects the 7000 richest individuals in Washington.

Keep in mind we don't have any income taxes here.

"Keep in mind we don't have any income taxes here."

That's not really what the supporters of this bill think. They claim an excise type tax already exists and that it provides precedent for this one since income taxes are unconstitutional.

Income taxes are not unconstitutional. Progressive income taxes are. No one wants to impose a flat income tax though.

Thanks for bringing that up. It looks like local income taxes are not allowed under law and that any tax at the state level has to be flat. It seems the article may have misrepresented that with "Income taxes are unconstitutional in Washington state.". (Unless there's some obscure case law regarding flat income taxes)

So, this is a tax on certain kinds of income rather than all income. And it exempts the first $250K, so it's a progressive tax. So...

I wonder if the courts care though. The B&O tax applies at different rates for different business types. The class of property taxed should be gross business receipts, but it seemed the courts are ok with the rates varying by business type.

I don't think that matters. The relevant text:

"All taxes shall be uniform upon the same class of property within the territorial limits of the authority levying the tax and shall be levied and collected for public purposes only. The word "property" as used herein shall mean and include everything, whether tangible or intangible, subject to ownership."

https://leg.wa.gov/CodeReviser/Pages/WAConstitution.aspx#AME...

The SCOWA has said income is property. But it's up in the air if capital gains is income, or property. I also don't think this would fail the test if it's considered a separate class though, since the rate is uniform with an exemption. My understanding is that model has been fine for a long time, and is how seniors can get discounts on property taxes or something.

"The SCOWA has said income is property. But it's up in the air if capital gains is income, or property."

How is that?

These taxes always start off only affecting the richest of the rich, until the government decides it needs more revenue.

“The government” is legislators that we elect. They aren’t some external force that is imposed on us.

Even in a perfectly democratic system, 50.001% of the population can impose a government on the other 49.999%.

If it's that finely balanced and the government imposed by the 50.001% is really that terrible, the situation should fix itself by the next election cycle, right?

or they could storm the Capitol

Can you give an example? Your statement feels like propaganda by the wealthy. So far they got a lot of tax cuts in the last few decades.

As opposed to what - taxing the poor first, or just not taxing anyone?

What if I told you that as an ordinary engineer I am perfectly OK with paying state income taxes and capital gains taxes here in Seattle?

Why? For the benefit of all.

I am not wealthy by any means given local expenses but I live comfortably. As someone who is better off than the majority of people (as are most of us on HN when compared to the people around us wherever it is we live) I feel it is important to invest in shared infrastructure and services for all. This is one of the important roles of government and I trust government a lot more to attempt to do the right thing (after all in the US we have a representative republic) with all people in mind versus a bunch of individual directly giving their funds to their favorite causes and projects. The patchwork of nonprofits for example doesn't have the ability to address systemic problems.

Altruism and empathy are not incompatible with capitalism (and rewards for your hard work or ingenuity). Some people here really should consider investing in their local community more.

> What if I told you that as an ordinary engineer I am perfectly OK with paying state income taxes and capital gains taxes here in Seattle?

Then you’d be making a much more realistic and honest argument that the one I was replying to.

Then gift the government money directly, and leave others to make their own decisions instead of imposing what you feel is right on them?

Here is the official process "Gifts to the U.S. Government": https://www.fiscal.treasury.gov/public/gifts-to-government.h...

Why is this being downvoted? I don't want to give more to the government to grow its bureaucracy even more. When they say it's meant for "education", it also means more administrators with useless roles on a tax-funded salaries + pensions which you'll be paying for.

“ It is estimated that this tax only affects the 7000 richest individuals in Washington.”

Careful, that’s how it always starts. Give it a decade or so and politicians will be upset at how few people are actually paying this tax. They’ll demand all sorts of changes to the exemption structure so that they can raise more revenue. All while saying it’s only going to effect other people.

Isn't this exactly how it works in the majority of western European and Scandinavian countries?

Nope, we have a much higher capital gains tax (and a progressive income tax) with a much smaller exemption, at least in Scandinavia.

The Alternate Minimum Tax was only supposed to affect less than 100 millionaires in the 1960's who were paying no taxes. Now, it is impacting 20+% of California tax payers most of whom earn under a million dollars a year and many of whom are not millionaires.

"In 2019, the AMT impacted just 0.1 percent of households overall. This includes 0.2 percent of households with income between $200,000 and $500,000, 1.8 percent of those with incomes between $500,000 and $1 million, and 12.5 percent of households with incomes greater than $1 million"

https://www.taxpolicycenter.org/briefing-book/who-pays-amt

That is a very recent change, post the Trump tax changes, which removed most of the impact of the AMT.

Interesting to see the current numbers. But even before then, the AMT disproportionately affected California taxpayers.

If I have a liquidity event at my startup, I'm going to be hit with this, right? Like many startup engineers, I've been taking less pay for shares for several years now. Funny, I don't feel like one of the richest 7000 individuals in Washington.

And I guarantee you as an early engineer, I'm likely going to hit 250k, but get nothing close to founder cashout money.

Unless you are forced to cash out, you can also liquidate ~250k of stock per year (or if options are available you can hedge your exposure and again extend the cash-out period over multiple years to spread out the tax impact)

If you got a $300k liquidity event. You will pay $3,500 in tax on it.

If you worked at that job for 10 years at $30k less than normal, that is $7,600 a year that you didn't pay in federal income taxes on that missed income.

Do the math, had you taken the income that would have been $76,000 in taxes over ten years vs $3,500 in taxes in one year.

You've made up some convenient numbers here to create a strawman.

If the liquidity is 500k, that's a $17.5k tax. I'm not going to stay at a job for 10 years for 30k less than market. That's a terrible decision. Most people would be looking after year 4, which is when options commonly fully vest.

With my made up numbers, that's a $30.4k tax over four years versus a $17.5 tax over one year. My made up ratio is far less appealing than your made up ratio.

It's more like the 7000 highest filers in any given year. The richest people may not be realizing capital gains. It's likely to affect people who happen to be selling their businesses that year, probably the only year they would ever fall into that group. It makes creating such a business and selling it while living in the state less attractive. Have to move to Texas before you sell?

It won't affect most businesses however. Only those with $10M in revenue in the year preceding the sale.

> Business owners are exempt from the tax if they were regularly involved in running the business for five of the previous 10 years before they sell, own it for at least five years, and gross $10 million or less a year before the sale.

Source: https://apnews.com/article/business-government-and-politics-...

Or legal source: http://lawfilesext.leg.wa.gov/biennium/2021-22/Pdf/Bills/Sen...

See Section 8, (2)(d)(iii)

In other words, the rich founders get richer while the early employees continue to get screwed.

That's completely nonsensical. I'm in Washington. I sold my options from my startup that was basically all profit last year and it was greater than 250k. Under this law, I would have coughed up 7% more in taxes. I'm not even remotely a highly paid dev. I just got lucky after years of being underpaid. This will affect way more people than just 7000 individuals.

The government always has to push the narrative that their tax increases will be on "them" the others, the people better off then you, not you. No no we will never increase YOUR taxes, we are only taxing "them" the ones that sleep on money and keep you down by not paying their "fair share"

Of course when the tax bill actually comes many people are often shocked they are included in "them"

If it were easy to generate the necessary inflation to avoid laws like this then nobody would have bothered with a capital gains tax increase or even with the idea of a wealth tax.

Yes, the number of options are decreasing day by day...

Agree, it would be more than 7000. I was just reacting to the the claim that it would affect the "most wealthy" which is not what an income tax targets.

So people who are able to move to escape this tax. 7.000 is not a big number, they could consult (maybe they did) with these guys and see if they are okay with such a tax.

> Keep in mind we don't have any income taxes here.

Washington currently has 0.4% income tax for W2 employees, and another 0.6% coming on Jan 1, 2022 unless you have sufficient long term disability insurance by Jul 2021 to be able to opt out of it.

So WA will effectively have a 1% income tax beginning Jan 1, 2022 for W2 earners (aka employees).

It looks like Oregon has a 9.9% capital gains tax, so moving to Portland would add to the tax bill of founders relocating before selling their company instead of reducing it.

Oregon also has a state income tax, unlike Washington.

Washington currently has 0.4% income tax for W2 employees, and another 0.6% coming on Jan 1, 2022 unless you have sufficient long term disability insurance by Jul 2021 to be able to opt out of it. So WA will effectively have a 1% income tax beginning Jan 1, 2022 for W2 earners (aka employees).

Searched for and couldn't find the 0.4% tax, which tax are you referring to? And for others, the incoming 2022 tax is a 0.58% payroll tax.

From WA directly: "Washington state does not have a personal or corporate income tax." [1]

1 - https://dor.wa.gov/taxes-rates/income-tax

https://paidleave.wa.gov/estimate-your-paid-leave-payments/

Washington can claim it does not have an income tax (for the purposes of subverting the state’s constitution forbidding it), but I do not see how money deducted from your income by government mandate is not a tax.

Oregon treats capital gains as regular income (so do most states, including CA).

Oregon also has one of the worst tax regimes in the country. For most earners, a resident of a state like CA without sales tax on groceries, medical care, or medical necessities will end up with a substantially lower tax burden than a similar earner in Oregon. To be more taxed than CA is crazy.

They will move to Oregon so that they can pay 9.9% instead?

I doubt any business owners are thinking about moving to Portland.

When I lived there a few years ago, there was an increasing amount of tech companies from Seattle opening up offices in Portland.

With all the sustained civil unrest and property destruction I’d steer clear of Portland if I wanted to open an office.

It has changed a lot with antifa having free reign for the last year. Lots of businesses boarded up and leaving. Even the Apple store was just set on fire again.

Somehow, I imagine you aren't in Portland or haven't spent a lot of time downtown. You are regurgitating right talking points.

It's not exactly a secret what's going on there. While I doubt the place is on fire 24/7, the substantial damage sustained to local businesses cannot be denied. It would be difficult to convince someone who was thinking critically about moving their business there that all is well now and going forward.

It's not a secret that the majority of the country has been dragged down into believing political fiction of some sort or another as fact by the relentless partisan propaganda. I'm sure many more people on the right were whipped into anger by the supposed $23 million in protest related losses than will ever read this:

https://www.oregonlive.com/portland/2020/07/coronavirus-clos...

You’re an example of the boiling frog if you think it’s perfectly normal and acceptable to light the mayor’s condo lobby on fire and riot over 100 days in a row. This has nothing to do with propaganda.

I didn't say that was acceptable and don't believe it is.

Even the mayor of Portland (who originally praised the protests) is asking the public to help stop the folks doing violence. How is this a right talking point? Are you ignoring reality?

Any amount of violence is too much, and just deligitimizes the protests and gives fodder to political commentators who aim to do so. Of course you would ask your people to help keep the peace. It doesn't mean it was so out of control as depicted in right wing news, which it wasn't.

I can assure you that nobody in this conversation got their information from right wing news.

> the mayor of Portland (who originally praised the protests)

This is counterfactual. Wheeler's been against the protests, and actively the subject of protest pretty much the whole time. He did a single media stunt participating in the protests and that's pretty much it. It was not well-received:

> On July 22, Wheeler addressed nightly protesters, but was booed by them for his actions as Portland Police Commissioner and the Portland Police's own response to the protests. The crowd chanted "Fuck Ted Wheeler" and "Quit Your Job" as he spoke.

His nickname is "Tear Gas Teddy," and it's not for being on the receiving end of the gas.

A lot of progressives seem to share this delusion and I find it puzzling. I have no idea who started this meme that there are “right talking points” going around about Portland. If such a thing exists, I have no idea what it is or where it comes from. Rest assured, my talking points are completely original and synthesized by my own senses. I’m in Portland quite frequently and was there earlier this month. I have many good friends there as well. I’d offer you some video footage that I took personally, but there is no shortage of it online. Ted Wheeler has even (finally) acknowledged it. The city is an embarrassment, and has gone to shit in the last 5 years.

Go ahead and post your video. Show us what horrible things you saw anteefa do.

Frankly, unless you've been doing a somewhat systematic survey of "businesses that have been boarded up" and "businesses that continue to operate as normal" and are doing so across the city (and not the very small part of the city where the protests have been taking place), this seems like an ideal situation to point out that the plural of anecdote is not data.

I’m talking about the riots and antifa/anarchist attacks, not the protests. And it doesn’t matter that there are places that are not being attacked and vandalized. This is of little consolation to the business that are suffering from regular criminal behavior.

Part-time Portlander here! You have absolutely no idea what you're talking about. Please stop basing your worldview on Infowars talking points.

Our eyes can see videos on Twitter. Go show us a picture of the Apple store operating normally then.

I am basing my opinion on my eyeballs walking around with my own feet. Please stop basing your worldview on denial and delusion.

Yeah ok. Your opinion is akin to saying that all of DC is continuously under siege because you saw a single video of the inauguration riots.

> At a whopping 7%, I expect a lot of startup founders and small business owners looking for an exit will be moving across the border to Portland right before they sell their companies.

Why? Oregon has income tax of 9-10% on all income over $9k/year.

Meanwhile we have 25% capital gains tax in Germany.

This is just the state rate. The current federal rate is 20%, and is about to rise to 43%. So, the full tax rate on capital gains in WA is 27% and going to be 50%.

I like that a certain amount is excluded but I don’t like exemptions for real estate. It should be treated like any other investment.

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